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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






2. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






3. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






4. A good for which higher income increases demand






5. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






6. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






7. The marginal utility from consumption of more and more of that item falls over time






8. Exists if a producer can produce a good at lower opportunity cost than all other producers






9. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






10. The ability to set the price above the perfectly competitive level






11. The difference between total revenue and total explicit and implicit costs






12. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






13. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






14. The rational decision maker chooses an action if MB = MC






15. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






16. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






17. Ei = (%dQd good X)/(%d Income)






18. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






19. The lost net benefit to society caused by a movement away from the competitive market equilibrium






20. Ed = 8 - infinite change in demand to price change






21. A firm that has market power in the factor market (a wage-setter)






22. Ed = 0 - no response to price change






23. The practice of selling essentially the same good to different groups of consumers at different prices






24. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






25. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






26. The imbalance between limited productive resources and unlimited human wants






27. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






28. Product demand - productivity - prices of other resources - and complementary resources






29. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






30. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






31. TR = P * Qd






32. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






33. ATC = TC/Q = AFC + AVC






34. All firms maximize profit by producing where MR = MC






35. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






36. Es = (%dQs) / (%dPrice)






37. Entry of new firms shifts the cost curves for all firms downward






38. Ed = (%dQd)/(%dP). Ignore negative sign






39. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






40. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






41. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






42. MUx / Px = MUy/Py or MUx/MUy = Px/Py






43. Exists at the point where the quantity supplied equals the quantity demanded






44. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






45. The additional cost incurred from the consumption of the next unit of a good or a service






46. 0 < Ei < 1






47. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






48. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






49. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






50. The difference between total revenue and total explicit costs